Without fix, Ohio won't have money to pay unemployed Ohioans

More city residents are working than in 2013. But employment growth for Cincinnati residents hasn't matched the region's, the nation's or that of some other nearby suburbs, Ohio state data shows.
Mark Wert/The Enquirer

COLUMBUS - Everyone agrees Ohio has a big problem: The state won't have enough money to pay unemployed workers when the next recession hits.

In fact, Ohio might not have enough money to pay unemployed workers by 2021 even without a recession.

And the nation is due for a recession. The longest gap between recessions was about 10 years. The last recession was in 2009, so you can do the math.

The problem

Ohio knows all too well what will happen if the state runs out of money to pay unemployed people. It happened before.

Following the Great Recession, Ohio's fund for paying unemployed workers went broke. The state, along with 35 others, had to borrow money from the federal government to pay for the burgeoning number of unemployed residents.

Ohio borrowed nearly $3.4 billion between 2009 and 2014 to pay unemployed workers. It paid $257.7 million in interest on that loan.

Because Ohio didn't pay that money back within the federal government's two-year grace period, employers were hit with a penalty. Instead of the normal minimum payment of $42 per employee, Ohio employers were paying at least $147 per employee until mid-2016, when lawmakers approved a plan to pay off the remaining debt.

No one wants to repeat what happened in the 2010s. Employers had to pay more in penalties. Ohio had less money available for schools, the opioid fight and other essential services. Everyone benefits from an adequately funded pot of money for unemployed workers. So why can't they agree on a solution?

Adding to the pot

To increase the amount of money in the pot that Ohio uses to pay unemployed workers, lawmakers need to either add more money to the pot or take less money out of it. Or both.

Most of the money paid into the pot comes from taxes paid by private employers.

Right now, employers pay taxes on the first $9,000 of their employees' wages into the unemployment compensation fund. That amounts to about 54 cents on every $100 in wages. A proposal from Rep. Kirk Schuring, R-Canton, would make employers pay taxes on the first $11,000 of their employees' wages.

Even with the proposed tax hike, Ohio's employers would pay less than those in most other states. Washington taxes employers on the first $45,000 of its employees' income. The median is about $14,000.

But why just tax employers? The bill also would tax employees at 10 percent of what their employer pays. That would amount to $5.50 to $112.20 a year, or $0.46 to $9.35 a month.

Only three states require employees to pay for their own unemployment benefits: Alaska, New Jersey and Pennsylvania. Employees there paid between $36 and $199 each year for unemployment.

The proposed system is similar to health insurance where both employers and employees pay into the program, Schuring said. He even rebranded the payments as premium and coinsurance.

Still, the Ohio Chamber of Commerce is wary of a new tax on employees.

"It is lying one more tax on to try to fix the problem instead of addressing spending," said Don Boyd, the chamber's director of labor and legal affairs.

Cutting benefits

So, let's talk about spending. Another way to ensure more money stays in the fund is to take less money out of it. That means slashing benefits paid to unemployed workers. Schuring proposes several ways to limit benefits:

Freeze the amount paid to employees for another 10 years.
(The maximum amount a person without children would receive would be $443 a week. When the freeze ends in 2029, maximum weekly benefits would jump to $662.)

Reduce the number of weeks most employees would receive benefits from 26 weeks to 24 weeks.

Reduce the amount paid for children if the Ohio Department of Job and Family Services director determines the unemployed person's household has other means of paying for the children.

Those changes would mean less money for unemployed people trying to find their next job.

Lowering the bar

Another way to hit an adequate amount of money in the pot for unemployed workers is to lower the bar. The bill would reduce the minimum safe level, the least amount of money that can be in the unemployment fund for it to remain in the black during a moderate recession.

That's not ideal, said Zach Schiller, research director for liberal think tank Policy Matters Ohio, but Ohio hasn't had enough money to hit the minimum safe level in years. So it might not be a big deal.

Another idea would ask voters to approve bonds to pay for unemployment benefits if the fund goes broke again. That way Ohio wouldn't have to ask the federal government for money and risk penalties. But the state also could lose out on the two-year grace period the federal government offers.

Political realities

Just because everyone agrees Ohio is on a collision course with the next recession doesn't mean they agree on how to fix the state's unemployment problem.

Increasing taxes on employers and employees won't sit well with fiscal conservatives.

Decreasing benefits won't be lauded by progressive Democrats.

"(N)obody's going to like it," said Speaker Cliff Rosenberger, R-Clarksville. "We can try all we like but that's what legislating is about. You can't make everybody happy."

Schuring promised some tweaks to make everyone feel more comfortable with the bill but was mum on the details.

Still, most following the bill expect some version will pass eventually. The alternative – simply letting the fund go broke during the next recession – would be disastrous for Ohio's businesses and budget. It's a compelling argument, Schuring said.

"At some point in time, we can’t keep kicking the can down the road," he said.